When the EU acts as an energy VC
Was its large Series A investment for a biogas startup justified?
News came across the ticker last week of the Series A funding of Reverion, a startup based in Munich, Germany. The spin-off of Technical University Munich raised €56m (approx. $62m). That’s a lot of money for a German climate tech. The round was led by Energy Investment Partners, a large US VC with $4bn AUM. Smaller existing investors joined, as well as the EIC Fund, which is basically the investment vehicle of the European Union.
And that’s why I got interested. Mario Draghi published his report on European competitiveness (and lack thereof) two weeks ago. Coverage has been extensive, so I’m not going to repeat it all here, but the gist is: European energy is too expensive, and Europe doesn’t innovate fast enough. In fact the reason Europe has fallen behind the US is mostly due to a lack of tech innovation and tech companies. The great stuff is built abroad. If Europe happens to invent something great, the company responsible eventually almost has to move to the US for its bigger market, better funding, and ample talent.
So presumably, the EIC Fund wants to tackle that and provide funding to great companies to let them innovate faster and keep them in Europe. Does Reverion fit the bill?
What does Reverion do?
Technology
Reverion has developed a solid oxide fuel cell. In general, fuel cells are best known for producing hydrogen from water and electricity, but also turning hydrogen and oxygen back into electricity.
Solid oxide fuel cell can also run with gases other than hydrogen. Reverion uses biogas. As I’ve described in a previous article, biogas is produced by anaerobic bacteria. They can digest almost any type of organic matter, and produce a mix of methane and other gases in return. The usable share of the mix is methane. Depending on what they are fed, the methane content is higher or lower.
Electricity production
The solid oxide fuel cells are housed in standard shipping containers. A 20ft container produces 100 kW of electricity, a 40ft container outputs 500 kW. But how much gas do they consume?
That’s the interesting part – for 100 kW of electricity, the fuel cells consume 125 kW worth of biogas. That’s an 80% efficiency! If you recall, current combined cycle biogas plants use about 44% of its input to produce electricity, and an additional 46% to produce heat. So overall efficiency is higher, but an 80% efficiency for electricity alone is staggering.
In addition to producing energy, the 20ft container also produces 40-50kg of CO2 for every 100 kW of energy. And that’s good, because it needs CO2 for storing energy.
Energy storage
So Reverion can produce electricity very well. But is the same true for storing energy? Let’s look at the numbers:
Biogas
The 20ft container uses 250 kW per hour to produce storable gases. 250 kW of electricity is turned 125 kW of biogas. At 80% efficiency, that becomes 100 kW electricity. Comparing output electricity to input electricity after storage is called round-trip efficiency. For biogas, that’s 100 kW / 250 kW = 40%
That’s … pretty bad. Do methane and hydrogen produce better numbers?
Methane
For every 250 kW of electricity the 20ft container produces 200 kW worth of methane. Converted back to electricity at 80% efficiency, that’s 160 kW of electricity, or a round-trip efficiency of 64%.
Hydrogen
Reverion produces hydrogen 6 kg for every 250 kW of electricity. That’s ~42 kWh/kg, near the minimum energy requirement of 40 kWh/kg. Impressive!
The energy density of hydrogen is 33 kW/kg, so 6 kg equates to 198 kW. That’s slightly worse than the plant’s methane production, which is 200 kW. From the spec sheet it is not clear that the fuel cell uses hydrogen. If we assume the same efficiency of 80%, the round-trip efficiency for hydrogen is 63.4%. But that’s too high because assumes loss-less storage, which isn’t true for hydrogen.
Hydrogen is the smallest molecule and escapes through the smallest cracks. Building a storage space is fiendishly difficult. That’s in stark contrast to methane (CH4), a much larger molecule and denser gas. It is stored in the typical green storage domes dotted around the German countryside, which are essentially very large plastic ballons.
Hydrogen would escape easily. Even if, the domes would have grow quite a bit – hydrogen needs about 3x as much space as methane for the same energy content.
Compressing or liquifying ruins the efficiency calculation even further. Generally speaking, 20% of the electricity used to produce hydrogen is lost during storage, compression and transport. Accounting for storage cost, the round-trip efficiency of hydrogen is 50.7%.
Business Case
Reverion has a great product. But they don”t seem to be sure what their plants should be used for. Otherwise it’s hard to explain that they position the product. They market it to farmers as a better biogas plant with higher efficiency, lower maintenance cost and a built-in gas production, whose output can be sold in addition to the electricity. How the gases are to reach the market from a bunch of farms is unclear. The need for storage in the meantime only receives cursory mention in their promotional materials.
In my opinion, Reverion does not offer biogas plants. They are in the long-duration energy storage business. Storing gas in a large plastic bubble is exceedingly cheaper than storing electricity in lithium-ion battery. Large biogas tanks (9,000m3) cost about €10/m3. Each m3 contains about 10 kWh of energy, so storage costs for methane are roughly €1/kWh.
In contrast, lithium-ion batteries are currently priced at (depending on who you ask) around €150/kWh. Making up for that difference requires many more cycles per year and access to much better financing, because the investment costs are higher.
Yes, the energy efficiency is not great, but the price difference between the cheap solar electricity in the summer months and higher prices during the darker winter months is substantial enough to make up for it.
Conclusion
Say what you want, but the EIC’s investment in Reverion is a smart move. Their go-to-market strategy seems odd, but the technology seems sound and provides a missing piece in the puzzle to solve a 100% renewable energy grid: long-duration energy storage.
All product data is publicly available on Reverion’s website. They have no idea who I am, and I’m not getting paid for this article.